The Energy Act 2011 and its impact on value, rent and compliance

Energy performance now matters in commercial leases in a very real way. What used to be a technical duty has become a key factor in deal‑making: an energy performance certificate (EPC) rating can stop a building from being let, affect the rent a landlord can expect, and force the timing of upgrades.

The Energy Act 2011 started that change, and rules introduced in 2018 and tightened in 2023 made EPC bands a commercial reality. As a result, landlords and tenants no longer consider these ratings as mere background policy; instead, they view them as essential financial considerations that should be included in due diligence, business plans, and lease negotiations from the very beginning.

Changes to lettings and what they mean

Since 1 April 2018, it has been illegal to grant new commercial leases for buildings with an EPC rating of F or G. From 1 April 2023, landlords were also banned from continuing to let those buildings unless they can rely on a valid exemption. The rule covers new lets, renewals and subleases and means EPC bands now directly affect whether a property is marketable and legally compliant.

MEES are increasing

Government policy is moving Minimum Energy Efficiency Standards (MEES) upwards. The question is no longer if the standards will rise, but how quickly landlords must act. The industry is planning a phased approach that uses EPC C as an intermediate target and moves many buildings toward EPC B over the coming years. Practically, this means a large share of commercial stock will need staged upgrades rather than single, one-off fixes.

How the Energy Act is impacting value, lending and rent

Valuers now factor EPC ratings directly into their assessments, and buildings with poor scores (typically F or G) are seeing reduced valuations. These ratings reflect future costs, regulatory risk, and marketability, all of which affect how much a property is worth today.

Lenders are also paying close attention. Properties with low EPC ratings may face stricter lending terms, reduced loan-to-value ratios, or even refusal of finance altogether. That’s because energy inefficiency can limit rental income, trigger compliance costs, and affect resale value.

For tenants, energy ratings can influence rent reviews and lease negotiations. If a building requires upgrades to meet legal standards, the question of who pays and when can shift the dynamics between landlord and tenant. Many leases include clauses that place legal compliance and repair costs on the tenant or allow landlords to recover expenses through service charges.

Surveyors, Royal Institution of Chartered Surveyors (RICS) professionals and legal teams routinely check EPCs during due diligence because ratings can materially change sale prices and mortgage security.

Exemptions and practical workarounds

Not every building is caught by the MEES rules. Some properties, such as listed buildings, temporary structures, small, detached units, or low-energy industrial sites, may qualify for exemptions. There are also cases where landlords can claim an exemption if the cost of improvements is too high or if they can’t get the necessary permissions from third parties.

But exemptions aren’t automatic. You’ll need solid evidence, such as independent surveys, written records of failed consent requests, or cost assessments to support your case. And even then, most exemptions are time-limited and don’t always carry over if the property changes hands. They’re helpful, but they’re not a permanent fix. Think of them as a short-term defence, not a long-term strategy.

Retrofit options and how to fund them

The most effective upgrades tend to mix quick wins with longer-term improvements. Start with low-cost changes like better lighting, smart controls, and heating system upgrades. Then look at bigger fabric improvements like insulation, glazing, and ventilation when the building is due for refurbishment or during a void period.

Government schemes like the Energy Company Obligation (ECO) and other retrofit funding programmes can reduce upfront costs for qualifying works. For some landlords, Green Deal-style finance still makes sense, spreading the cost over time and repaying it through energy savings. But any investment needs a clear payback plan and a solid understanding of the lease structure, especially if tenants are expected to contribute.

A simple action plan for landlords and tenants

Map and prioritise: Start by reviewing your property portfolio. Identify any buildings with an EPC rating of F or G, then work out which ones need attention first. Think about cost, upcoming lease events, and any planned voids or refurbishments that could be used as upgrade opportunities.
Check the paperwork: Go through your leases carefully. Look for clauses about legal compliance, service charges, and who’s responsible for energy improvements. These details will affect who pays for what and when.
Plan and budget: Arrange energy surveys to understand what upgrades are needed. Use the results to model payback periods and include the costs in your wider plans, whether that’s refinancing, maintenance budgets, or preparing a property for sale. Getting guidance early can help avoid rushed, expensive fixes later on.

Treat energy performance like asset management

As standards tighten, those who plan ahead will come out on top. Landlords who treat energy performance as part of their asset management can avoid last-minute spending, protect property values, and keep finance options open. Tenants also benefit from clarity. Knowing who’s responsible for upgrades and how they’ll be phased helps avoid surprise costs and legal disputes.